Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company adjusts its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. The Company also records the tax effect of unusual or infrequently occurring discrete items.

The provision for income taxes is shown in the tables below:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Income tax expense	$	17,422	$	5,012	$	44,276	$	2,936

Income tax expense increased $12.4 million to $17.4 million for the three months ended September 30, 2024 as compared to $5.0 million for the three months ended September 30, 2023, primarily due to an increase in pre-tax operating income which resulted from the 2021 GRC decision.

Income tax expense increased $41.3 million to $44.3 million for the nine months ended September 30, 2024 as compared to $2.9 million for the nine months ended September 30, 2023, primarily due to an increase in pre-tax operating income, which resulted from the 2021 GRC decision.

The Company’s effective tax rate was 20.6% and 11.4% before discrete items as of September 30, 2024 and September 30, 2023, respectively. The increase in the effective tax rate was primarily due to the recognition of income related to the 2021 GRC decision.

On June 27, 2024, California Senate Bill 167 (SB 167) was enacted into law. SB 167 provides for a three-year suspension of net operating losses under the California Corporation tax. Among other things, this new law temporarily disallows the use of net operating losses for years beginning in 2024 through 2026. As a result of the passage of SB 167, the Company accrued approximately $15.3 million of California income taxes for the nine months ended September 30, 2024.

The Company had unrecognized tax benefits of approximately $17.3 million and $14.8 million as of September 30, 2024 and 2023, respectively. Included in the balance of unrecognized tax benefits as of September 30, 2024 and 2023, is $5.1 million and $4.6 million, respectively, of tax benefits that, if recognized, would result in an adjustment to the Company’s effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly within the next 12 months.